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EU, Japan agree to work towards mega free trade deal

By Agence France-Presse
Saturday, May 28, 2011 10:38 EDT
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BRUSSELS (AFP) – Leaders of the European Union and Japan on Saturday agreed to start talks towards a multi-billion-euro free trade deal linking the world’s third biggest economy to the globe’s largest market.

Long demanded by Tokyo, the decision to launch preliminary talks on a trade deal, as well as on a binding political accord, was announced at the close of a summit between EU leaders and Japanese Prime Minister Naoto Kan.

“We still have a long way to go, but the objective is now clear,” said EU president Herman Van Rompuy after the talks in a history-packed castle nestling in parkland on the outskirts of Brussels.

“When two of the world’s largest trading partners jointly confirm their intention to work towards a free trade agreement, that is a big step forward,” he added.

A joint statement said it was “agreed to start the process for negotiations for a deep and comprehensive free trade agreement (FTA)/economic partnership agreement (EPA), addressing all issues of shared interest to both sides”.

Among issues listed in the document are tariffs, non-tariff-measures, services, investment, intellectual property rights, competition and public procurement.

Hailing a move that helps defuse decades of trade friction, Kan said: “I’m convinced this will lead to a far-reaching economic partnership agreement.”

But the EU says a mountain of work remains to identify sticking points and compile a to-do list of obstacles to overcome before member states will approve official negotiations towards an FTA between the two economic giants.

The EU’s signature of an FTA with Asian rival South Korea last year has upped Tokyo’s insistence on a deal to offset fears that Japan’s famed electronic appliances and automobiles may lose a competitive edge.

But European businesses complain of continuing obstacles in accessing the Japanese market, and Brussels in particular wants Tokyo to open up its public procurement market.

Tackling all the obstacles to free trade would release a “big potential” for business on both sides, said European Commission president Jose Manuel Barroso.

Concretely, Saturday’s agreement provides for an immediate start to to hammer out a list of problems to address and goals to achieve — a process known in EU jargon as a “scoping exercise”, likely to take six to nine months.

Only then could the EU 27 give a green light to an official launch of FTA negotiations.

Prompted by Britain, Europe’s leaders in March called for FTA talks to aid Japan — but on the proviso that Tokyo lift restrictions to trade.

Trade ties consistently favour Japan, with Tokyo’s better track record “partly a reflection of continuing market access problems for foreign firms in Japan,” a European Commission report said this year.

Japan, struggling to recover from a devastating March tsunami and nuclear meltdown, had hoped the summit would offer a formal launch of FTA talks, but Europe held back until winning more assurances of a level playing field.

“We want to do business with Japan but there must be a clear give-and-take,” said a business sector lobbyist who asked not to be identified. “We want to see clear signs from Japan that it is open to us.”

Europe notably complains over unfair treatment in government procurement, comparing a 312 billion euro procurements market (2.5 percent of EU GDP) open to Japanese companies in 2007, to a 22 billion euro share (0.5 percent of Japan’s GDP) offered to EU firms.

Even the European Parliament stepped up on the eve of the summit to warn against jumping into bed with Japan.

“Instead of rushing headlong into new negotiations over a free trade agreement, EU countries should insist on tangible results,” said Euro-MP Daniel Caspary, who sits on the assembly’s trade committee.

Britain’s Foreign Secretary William Hague this month touted the prospects of a golden pot. The removal of tariff and non-tariff barriers could deliver over 40 billion euros ($60 billion) of additional European exports to Japan, and more than 50 billion euros of extra exports from Japan to the EU, he said.

Agence France-Presse
Agence France-Presse
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